Swap the Income Tax for a Carbon Tax

Most people see taxes as a necessary component of life. Your average person sees the point behind them and acquiesces to paying them for the governmental guarantees granted by being a citizen of a particular nation. Now, with this in mind, I want you to think ideologically for a moment, if you will, about taxes. If we presuppose the notion of taxation as necessary, which of these actions then makes more sense: taxing an action that is generally a positive thing, or taxing an action that is generally negative? The answer is clear: it would be better to tax a negative action.

Right now, the United States taxes in a way that deters efficiency and is considerably less sensible than other options. As things currently stand, with our primary source of taxes being income, there are a portion of Americans for whom there exists a financial deterrent on making more money due to higher taxes. We have all heard of someone who got a raise and then ended up having less net income because it pushed them into a higher tax bracket. Even if one did not see any of this as an issue, they may still have to admit that not taxing a negative behavior is a wasted opportunity.

Now that I have highlighted the problems of the current policies in place surrounding the income tax, I would like to propose a more logical, and more environmentally sustainable, solution: the carbon tax. I think that the United States government should shift the tax on income to a tax on carbon. If we levy taxes on a generally negative behavior, like carbon emissions, this should curb said behavior. With man-made carbon emissions the highest we have seen, and a leading driving factor behind anthropogenic climate change, regulating carbon is a change in policy we must see soon in order to combat this.

At the mention of the phrase “carbon tax,” half of those reading this will groan in agony—more so as a reflex than anything else. Generally speaking, conservatives and businesses will bill the notion of a carbon tax as overly-

idealistic; as something that could never happen. They will say that it would halt industry entirely. Let us examine this: Out of all possible industries, many are not carbon intensive, so presumably they would be lightly affected at most. In an industry that is carbon intensive, which scenario is more likely: (1) the proprietors of said business allow a tax on carbon to halt their business entirely, or (2) they innovate in ways which allow them to maximize product output and revenues while accounting for the payment of a carbon tax.

An alternative manner in which to regulate carbon is to institute a cap-and-trade system involving carbon credits, but it is not as simple as a flat tax on carbon. Essentially, a certain number of credits for a specified amount of carbon emission will be given out to various individual and commercial entities. This then gives these entities the right to emit however much carbon that corresponds with the credits they have, and allows them to buy and sell credits depending on their needs. They will offer this as an alternative to managing carbon output over a carbon tax. Additionally, a cap-and-trade system does not ensure price of carbon, but rather lets the market decide. A cap-and-trade system does, however, ensure carbon output, which would be determined by the number of carbon credits doled out on an annual basis. Conversely, a carbon tax ensures price of carbon but not total emissions, which I propose to you is a better system because it prevents the price of carbon from skyrocketing. The amount of carbon emissions could still be assessed holistically every few years and the tax be adjusted accordingly. Another advantage that a carbon tax holds over a cap-and-trade system is that it is much simpler.

All considered, a tax on carbon is more logical than the current system. As discussed, the idea of taxing a negative as opposed to a positive makes sense. While some may differ in thought over the proper manner in which to regulate carbon, flat taxation is simpler than setting up a market-based system, and makes better inherent assurances. Carbon taxation is unfortunately a notion that within policy has not yet gained much traction. This would be a sensible and ideal policy shift.

About the blog

This blog is a collaborative work by the Spring 2018 ENV 212 course. Throughout the semester, each student will have a chance to write about a topic of interest related to environmental policy in the United States.